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EC3076 - Coursework 2 EC3076 - Coursework 2 QUESTION llis Ltd is a retail business and Mohammed, the finance director, has produced the following trial balance for the year ended 31 January 2021 The company has had a difficult year due to the pandemic and the trial balance produced does not balance so he has asked for your help. Willis Ltd Trial Balance as at 31 January 2021 Dr f'000 Cr '000 1.926 2,641 480 36 36 182 242 2,840 280 240 120 1,864 2,640 263 16,800 2,860 Accumulated depreciation - Office equipment at 1 February 2020 Accumulated depreciation - Factory buildings at 1 February 2020 Accumulated depreciation - Vans at 1 February 2020 Allowance for receivables at 1 February 2020 Carriage inwards Carriage outwards Directors remuneration Discounts allowed Discounts received Dividends paid Insurance Inventory at 1 February 2020 Irrecoverable and impaired debts Land and factory buildings-Cost Light and heat Loan from bank at 6% Loan interest paid Office equipment - Cost Office expenses Overdraft Payables Purchases Receivables Retained earnings at 1 February 2020 Returns inwards Returns outwards Sales Share capital (shares have nominal value of 20p) ) Share premium account Vans-Cost Wages 3. The depreciation policy for Willis Ltd is as follows: Factory buildings - straight line basis over 50 years Office equipment -20% per annum on a reducing balance basis. Vans - straight line basis over 5 years, The vans are used to deliver goods to customers. The factory buildings depreciation is charged to cost of sales and office equipment to administrative expenses. 4. A debt of 260,000 is to be written off and an allowance made for a further debt of 130,000. The debt of 36,000 for which allowance was made in the previous financial statements has now been paid in full. 5. Willis Ltd employ 54 staff, of which 27 work in the factory, 12 are delivery drivers and 15 work in administration. 6. An accrual for light and heat for the month of January 2021 is needed - it was a particularly cold month 7. A payment for delivery costs to customers for [84,000 has been debited to the carriage inwards account and credited to the cash at bank account. 8. A cash payment to a supplier for 600,000 has been credited to payables and credited to the cash at bank account. 9. A 25 year bank loan was taken out on 1 February 2012 The loan capital is being repaid in equal instalments starting on 31 January 2013 and on 31 January each year thereafter. 10 Insurance includes 640,000 for the year to 30 April 2021. 11 An invoice for goods purchased for resale totalling 84,000 has been debited to insurance and credited to payables. 12 Taxation for the year is estimated at 630,000 13 A dividend for shareholders of SOP per share was proposed on 15 February 2021 but has not yet been paid 14. On 31 January 2021 there was a fire in the warehouse and all of the inventory and the inventory records were destroyed. In addition to the information above and in the trial balance, you know that: all sales are made based on a gross profit mark-up of 15% on the purchase cost of goods sold, and Willis Ltd has an insurance policy which covers the sales value of any items of inventory that are lost. Required: (a) Prepare the journal entries to correct the trial balance and deal with all of the year-end adjustments. You should clearly state all relevant assumptions made, show all of your workings and show the suspense account clearance. 160 marks) (b) Produce a statement of profit or loss for the year, a statement of changes in equity and a statement of financial position for Willis Ltd as at 31 January 2021, in a form suitable for publication. (40 marks) 16,000 720 2.560 80 1,200 3,980 36,732 8.920 15,084 244 424 41,848 96 384 2,000 3,942 83,469 84.159 Additional information: 1 Willis Ltd sold some equipment on 31 July 2020 for 150,000. The finance director has debited the bank account with the 150,000 but has done nothing else. The equipment cost E360,000 on 1 November 2016 2. The land and buildings figure in the trial balance includes 7,500,000 for the land. Total: 100 marks EC3076 - Coursework 2 EC3076 - Coursework 2 QUESTION llis Ltd is a retail business and Mohammed, the finance director, has produced the following trial balance for the year ended 31 January 2021 The company has had a difficult year due to the pandemic and the trial balance produced does not balance so he has asked for your help. Willis Ltd Trial Balance as at 31 January 2021 Dr f'000 Cr '000 1.926 2,641 480 36 36 182 242 2,840 280 240 120 1,864 2,640 263 16,800 2,860 Accumulated depreciation - Office equipment at 1 February 2020 Accumulated depreciation - Factory buildings at 1 February 2020 Accumulated depreciation - Vans at 1 February 2020 Allowance for receivables at 1 February 2020 Carriage inwards Carriage outwards Directors remuneration Discounts allowed Discounts received Dividends paid Insurance Inventory at 1 February 2020 Irrecoverable and impaired debts Land and factory buildings-Cost Light and heat Loan from bank at 6% Loan interest paid Office equipment - Cost Office expenses Overdraft Payables Purchases Receivables Retained earnings at 1 February 2020 Returns inwards Returns outwards Sales Share capital (shares have nominal value of 20p) ) Share premium account Vans-Cost Wages 3. The depreciation policy for Willis Ltd is as follows: Factory buildings - straight line basis over 50 years Office equipment -20% per annum on a reducing balance basis. Vans - straight line basis over 5 years, The vans are used to deliver goods to customers. The factory buildings depreciation is charged to cost of sales and office equipment to administrative expenses. 4. A debt of 260,000 is to be written off and an allowance made for a further debt of 130,000. The debt of 36,000 for which allowance was made in the previous financial statements has now been paid in full. 5. Willis Ltd employ 54 staff, of which 27 work in the factory, 12 are delivery drivers and 15 work in administration. 6. An accrual for light and heat for the month of January 2021 is needed - it was a particularly cold month 7. A payment for delivery costs to customers for [84,000 has been debited to the carriage inwards account and credited to the cash at bank account. 8. A cash payment to a supplier for 600,000 has been credited to payables and credited to the cash at bank account. 9. A 25 year bank loan was taken out on 1 February 2012 The loan capital is being repaid in equal instalments starting on 31 January 2013 and on 31 January each year thereafter. 10 Insurance includes 640,000 for the year to 30 April 2021. 11 An invoice for goods purchased for resale totalling 84,000 has been debited to insurance and credited to payables. 12 Taxation for the year is estimated at 630,000 13 A dividend for shareholders of SOP per share was proposed on 15 February 2021 but has not yet been paid 14. On 31 January 2021 there was a fire in the warehouse and all of the inventory and the inventory records were destroyed. In addition to the information above and in the trial balance, you know that: all sales are made based on a gross profit mark-up of 15% on the purchase cost of goods sold, and Willis Ltd has an insurance policy which covers the sales value of any items of inventory that are lost. Required: (a) Prepare the journal entries to correct the trial balance and deal with all of the year-end adjustments. You should clearly state all relevant assumptions made, show all of your workings and show the suspense account clearance. 160 marks) (b) Produce a statement of profit or loss for the year, a statement of changes in equity and a statement of financial position for Willis Ltd as at 31 January 2021, in a form suitable for publication. (40 marks) 16,000 720 2.560 80 1,200 3,980 36,732 8.920 15,084 244 424 41,848 96 384 2,000 3,942 83,469 84.159 Additional information: 1 Willis Ltd sold some equipment on 31 July 2020 for 150,000. The finance director has debited the bank account with the 150,000 but has done nothing else. The equipment cost E360,000 on 1 November 2016 2. The land and buildings figure in the trial balance includes 7,500,000 for the land. Total: 100 marks